Hi guys,
I'm expecting to start gaining some extra income from gigging by the end of the year.
Wanted to know what I should do with HMRC -(currently under basic employment, PAYE iirc)- and what can I claim as expenses;
Gig miles, gear depreciation etc etc.
A guy told me once I could even register my flat as the basis of my business (practice, home recording etc) and claim rent as expenses??
If I got this right, I need to register my self again as a self employed musician; or do I need to set up an actual business?
Can I do this now or do I need to start trading - earning first?
And can I register any assets-gear obtained prior to this registration?
Priority is to make sure any money I'll earn is legit and the circumstances transparent and then claim smth back if possible.
I sold a pedal to guy today and asked me for a receipt for his accounts and got me intrigued though I knew I'd have to sort this at some point anyway..
So, how do you guys do it?
I'm only interested in legal, formal procedures, no tricks etc.
Thanks,
T.
Comments
ask for cash
put in pocket
walk away whistling
Ed Conway & The Unlawful Men - Alt Prog Folk: The FaceBook and The SoundCloud
'Rope Or A Ladder', 'Don't Sing Love Songs', and 'Poke The Frog' albums available now - see FaceBook page for details
I have to fill in a tax return which documents how much I have earned and offsets it against various things (which I am never 100% sure I have correct, so I shall not advise on that, best to take proper professional advice on that!) I also have to include my earnings in my day job and things like my company car as that affects the tax allowance or something...I don't know, I just fill in what it asks for!
Pub gigs, I certainly wouldn't lose any sleep over it, but if you expect to earn a few thousand from functions etc, it may be a different story.
For me personally, the decision to do it all above board was based on wanting to have a visible, documented income that I could take to the bank for purposes of a mortgage - At first I doubted they would accept a tax return as proof of income, but they reckoned they would. Never tested the point though as I've not applied for a mortgage since!
Ed Conway & The Unlawful Men - Alt Prog Folk: The FaceBook and The SoundCloud
'Rope Or A Ladder', 'Don't Sing Love Songs', and 'Poke The Frog' albums available now - see FaceBook page for details
Receipts, diary etc all make for nice records to substantiate everything. If you want to have a professional do the numbers you can save lots of money by presenting them with tidy records rather than a carrier bag full of receipts.
You should keep all receipts and record of spending, in CASE you make a profit (which is harder than it sounds), if you do, you can back date profits and deduct expenses. If you make no profit there is nothing to pay, and then you'd be thinking "how many £100s a year do I need in takings before HMRC are interested?" my guess is £1k+, but as I say, if you've spent more in tools of the trade, petrol mileage, room hire, hotel bills, lessons, etc.... then offset that.
I knew someone at my last work who did 200+ paid gigs a year, and used to live on it
Dig out all your old receipts and make a note of travel expenses for the last 2 years quick before you forget
If you are earning from gigging then you should be registered with HMRC as self employed (or otherwise depending on situation). Intention doesn't matter and neither does level of earning. If your on PAYE then presumably you are already earning enough that any extra income should be subject to tax therefore HMRC are interested.
Obviously cash in pocket is a no-no and it's against my professional interests to suggest otherwise.
Unfortunately, unless you are a genuine full time musician, it probably won't be as simple as 100% of gear expenses being deductable - I'm sure there would be a personal usage adjustment of some sort. I've no idea of percentages as I don't have enough info but I'd guess upwards of 50% reduction dependant on schedule etc. If you fill in a tax return it's up to you to make a suitable adjustment but, if queried, you'll need to defend the figure to HMRC. A 100% claim would only really be suitable if it's something you'd no longer use if you stopped gigging.
Obviously mileage, subsistence etc is fair game but I think use of home for practicing would be a stretch. Again it's self assessment so it'd be your call but one that you'd have to be prepared to defend.
The trouble you have is that you'd be earning from something you'd be doing for pleasure otherwise and HMRC know this.
I'd advise one of two approaches dependant on how much you'll be earning.
If it's not a significant amount talk to HMRC. Be honest and open and ask for advise about allowable expenses. The people who are on the help lines are surprisingly helpful if you do this.
If it's a reasonable amount (i.e. enough to make the associated cost of one worthwhile) contact an accountant. Most decent ones will offer a free initial meeting where you can discuss such matters. Obviously you could take advantage of this and take the advice and walk but if you aren't sure what you are doing then having someone prepare accounts and fill in your return can be worth the cost.
good advice from RedRabbit- take a Wisdom
As I say, keep all receipts, but as he says, you can't simply deduct them. The more you earn though, the less like a hobby it will be considered by HMRC. Home allowance for working is peanuts, however if you got an Esmono room for your garage you could claim, costs have to be spread over years, with depreciation and various factors I am too bored to learn, so if you spend a lot of cash, get advice
Does the Musicians' union offer a simple guide for this, since accountants would be expensive
The standard HMRC test is "is an expense wholly and exclusively for the job" - hence the compromise needed if you're not doing many gigs. If you were doing 200 a year, they would have to agree it was a job, not a hobby
As I've said, I'll consult the tax lady in the company I work with when the time comes
Thanks again,
T.
http://www.hwfisher.co.uk/images/stories/docs/mutaxguide2012.pdf
this is the guide you need. Loads of stuff in here